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Wanfeng Zhou, 20:44, Tuesday 26 July 2011
NEW YORK (Xetra: A0DKRK – news) (Reuters) – The U.S. dollar fell broadly on Tuesday as U.S. lawmakers remained deadlocked over raising the nation’s debt ceiling to avoid a devastating default, while U.S. and European shares also declined.

Unless lawmakers reach a deal to raise the $14.3 trillion (8.71 trillion pounds) ceiling by August 2, the United States faces the prospect of a default on some of its $9.6 trillion bonds outstanding.

President Barack Obama, in a televised address Monday night, warned that this would be a “reckless and irresponsible outcome,” but he gave no indication that a compromise was imminent.

Weakness in the greenback helped buoy crude oil prices, while gold hovered near a record high above $1,600 an ounce as investors sought the precious metal for safety.

The U.S. currency hit a record low against the Swiss franc of 0.7997 franc on trading platform EBS and fell to a four-month low near 77.883 yen, approaching a record low of 76.25 set in March.

“The market is getting more nervous about the debt ceiling issue,” said You-Na Park, currency strategist at Commerzbank (Other OTC: CRZBF.PK – news) in Frankfurt. “If the market was really starting to price in the possibility of a default, the dollar would be losing more than what we saw.”

Against a basket of currencies, the dollar fell 0.8 percent. The euro rose 1 percent to $1.4517. Investors fear a potential debt default and a downgrade of the U.S. credit rating would tarnish the dollar’s status as a global reserve currency.

The debt gridlock in Washington also hit U.S. stocks with the Dow (NYSE: DPD – news) , the biggest loser, suffering additional pressure from investor disappointment over quarterly earnings from 3M .

The Dow Jones industrial average was down 75.99 points, or 0.60 percent, at 12,516.81. The Standard & Poor’s 500 Index was down 3.75 points, or 0.28 percent, at 1,333.68. The Nasdaq Composite Index was up 1.34 points, or 0.05 percent, at 2,844.14.

“We’ve been seeing volume start to dry up as traders are seeing less positions,” said King Lip, chief investment officer at Baker Avenue Asset Management in San Francisco.

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